Bangladesh's economy shows signs of stabilisation amid weak investment

Bangladesh’s economy is showing signs of stabilisation, supported by steady remittance inflows, prudent fiscal management, and a gradual improvement in foreign exchange reserves, though overall growth remains sluggish amid weak investment and persistent inflationary pressures, according to the Policy Research Institute (PRI).

The PRI reported that GDP growth fell sharply to 3.35 per cent in the April–June quarter of the last fiscal year from 4.86 per cent in the preceding quarter, mainly due to a sluggish investment climate, softer export performance, and a prolonged slowdown in domestic demand.

The observations were presented in the latest edition of the Monthly Macroeconomic Insights (MMI), developed under PRI’s Centre for Macroeconomic Analysis (CMEA) in collaboration with the Department of Foreign Affairs and Trade (DFAT) of the Australian Government.

Dr Ashikur Rahman, Principal Economist at PRI, delivered the keynote at the event, chaired by Dr Zaidi Sattar, Chairman of the institute, arranged at the PRI office on Wednesday to release the MMI.

Dr Monzur Hossain, Member (Secretary) of the General Economics Division (GED) of the Planning Commission, attended as the chief guest, while economists, experts, and private sector representatives also spoke at the session.

Dr Zaidi Sattar said that with an investment-to-GDP ratio of 29 per cent, Bangladesh has the potential to achieve a growth rate of over 5 per cent, but global multilateral institutions have revised down their growth projections.

He added that macroeconomic stability has been restored, albeit modestly, while external indicators such as the balance of payments and foreign exchange reserves remain in a comfortable position, aided by a flexible exchange rate.

Monzur Hossain emphasised that investment is shaped by the broader economic ecosystem rather than by isolated policy decisions.

He stressed factoring out the inflation, high interest rate and lower investment and said tight monetary policy has helped curb inflation, high interest rates may be contributing to weaker investment.

“Since the interim government assumed office, macroeconomic stability has improved, inflation has moderated, and pressures on the exchange rate and foreign reserves have eased,” he said.

Presenting the keynote, Dr Ashikur Rahman warned that growth has slowed due to contractionary monetary policy, delayed ADP implementation, political uncertainty, and stagnancy in private investment.

He highlighted the potential implications of poverty, noting that both poverty and inequality are expected to rise.

“The extent to which poverty is addressed will depend on how the next elected government expands and ensures the efficiency of social protection programs,” he said, cautioning that the ongoing stabilisation process is particularly costly for the poor, while the wealthy are better able to manage it.

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